Should we blame the GREEDY real estate market for our economic mess?

So far I haven't heard this argument from anyone in the media so I thought I would mention it. Everybody seems to blaming the poor or middle class citizens who got financing on their home and later couldn't afford to pay it. But one thing that many people are forgetting is how EXPENSIVE property is these days. Back in the early 90's my mother and father purchased a home for $30,000. They recently put the house on the market and the real estate agent recommended a price tag of $210,000 total since they had a double lot and sold the lot separately. I know most of you are probably thinking that making $180,000 in profit off a house you lived was a pretty good investment. But what about the people who purchase the property with financing? By the time they're done paying for their mortgage it's going to cost them DOUBLE that amount. That means that the house my mother and father purchased is going to cost them OVER 10 TIMES AS MUCH. It seems that property values have peaked beyond control and nobody finds anything wrong it. And who can you blame for that? The GREEDY real estate agents and homeowners who think they can get a little bit more for their property. This has made property so unaffordable for the middle class that I BELIEVE some people are giving up on their mortgage a few years after they purchase their home. If the cost of purchasing a home was fair then maybe they wouldn't do that. Now I'm no expert on the economy so please let me know what you find wrong with my theory.

 

Why bother? Blaming does nothing to help the situation now.

 

Your a little offtrack, there is a relationship between wages and home prices so when incomes go up as they have from 1990 when your parents bought their home, people have more income and can buy a bigger home, so that the value of parents homes isn't really the issue, since the true value of the home depends on another persons willingness to pay for it. Over the last few years incomes have become stagnant while the prices of homes has greatly increase this has been largely to the availability of cheap financing of homes ie variable interest rates loans and interest only loans, which continued to push home prices higher. Now the blame part. I believe in 2007 40% of the homes bought and sold were done so as investments which lead builder to build more homes then they otherwise would need to, that has lead to a drop in homes prices, which then caused banks who issued the loans to have to market down the value of their assets which caused them to raise more capital and in some cases where they could raise capital they want bankrupt, see Washington Mutual, and that's how we got here.

Once you find out who is you blame, you can find out why it happen and learn how to fix the problem

 

Oh yeah. I'm going to single-handedly fix this entire economic mess.

One thing that you missed though is that it take a lot longer to pay off a house that costs $200,000 than it does a $40,000 home. Some people are excited when they get their financing but after see the "never-ending" story in front of them it probably makes them want to bail out.

 

You can't blame the greedy market. The market is driven by greed, or better put, self-interest. The onus is on the regulatory system and those responsible for constructing it to make sure the greed of the market doesn't cause it to eat itself and everything around it.

 

Well, a family friend of ours is getting ready to pull out of his mortgage because he doesn't see the point of paying off his "never-ending" mortgage. He tried putting his house up for sale and he hasn't received any offers. Maybe it's because property has become so overly priced that people will only go for the best deals. Compared to the prices of the early 90's, the best deals out there are complete rip-offs.

 

Sounds like a cop out to me.

 

I bet a lot of people who bought homes in the last two years feel that way

 

Whatever a house price might be, there once was a time when a bank and/or mortgage broker provided a mortgage only if the buyer met some very strict rules and there was confidence that the buyer could pay back the mortgage.

What started this mess is lending to people who really couldn't afford it by doing things like providing interest only mortgages. I even heard about mortgages where the buyer paid even less than that and the difference due was simply added to the principal. That's all well and good if property values are rising, but if they are not, both of these mortgage options stink. With both options, if housing prices drop, it is easy to see how someone could become upside down on their loan.

 

When the market bottoms out is the time to buy homes and then apply for the government housing program. The Government will give you enough money to cover the payment and insurance and you can build equity without spending a dime.


It would be great to rent to the people that originally lost the house.

 

Also, how can you make any profit on a home that's already overly priced and may actually go down in value when other homeowners in your area get desperate to sell their home or foreclose? I think real estate officially went from being one of the best investments to being the worst.

 

When the market bottoms out is when you buy homes.

 

Yeah, but back in the early 90s almost ANYBODY with a decent paying job could get a mortgage with "confidence". They saw it as a good investment which motivated them to pay it off. These days that confidence is gone after somebody figures out how long it will take them to pay off the house they supposedly bought. It turns out that buying a house is paying it off in CASH. Not making $800 a month payments for 50 years.

If the market bottoms out then anybody who financed a house within the past 3 or 4 years will LOSE value in their homes. EVEN MORE PEOPLE will bail out of their mortgages if that happens.

 

you lost me now. Houses in certain areas are selling for half the appraised value. If you buy the house and can lease it to cover taxes, payments and to turn about a 15 to 30% profit you will make money.

Who in the world would buy a house with a pay off for more than 15 years?

 

Houses selling for less than appraised value brings the future appraisals down.

Last I heard, most everyone who buys a house. It also keeps the minimum owed per mouth down, should you have problems. You of course can pay more than the minimum should you wish and be able to. 'at least where I live, no prepayment penalty'

 

Half the appraised value??? Where the heck do you live? Or are you referring to foreclosures?

 

The housing market has not changed where I live. When I stated "half" I was going by is said on the news.

I assumed that the market fell where you are at from what I read.

 

I don't think the American people have been given enough information to determine that the reason people are bailing out on their mortgages is because they couldn't afford it. The only way they can figure out the overall reason is to send out a poll to every single person that foreclosed and to ask them the honest reason why they did so. I can guarantee you that most of them won't say it was because they couldn't afford the payments. Many of the people that couldn't afford their payments may be because they lost their jobs because of the bad economy.

 

I'm sure that has something to do with it, increased prices on standard good as well such as food and gas surely is to blame at least to a small extent.